The 2020 Long-Term Budget Outlook

In CBO’s projections, mandatory spending decreases from 22.4 percent of GDP in 2020 to 14.2 percent of GDP in 2024, primarily because of declining spending related to the pandemic. In most years thereafter, mandatory spending rises, reaching 15.1 percent of GDP in 2030. Those increases in mandatory spending stem from the aging of the population, which causes the number of participants in Social Security to grow faster than the overall population, and growth in federal health care costs per beneficiary that exceeds the growth in GDP per capita. From 2025 to 2030, increased mandatory spending as a percentage of GDP is responsible for much of the increase in deficits over that period. Discretionary spending, which is generally projected to keep pace with inflation, decreases in relation to the size of the economy over the decade, from 8.0 percent of GDP in 2020 to 5.8 percent in 2030.6 Revenues rise from 16.0 percent of GDP in 2020 to 17.8 percent in 2030; roughly half of that increase comes from the scheduled increases in taxes at the end of calendar year 2025.

As a result of those changes in spending and revenues, primary deficits (which exclude net spending for interest) fall in most years in CBO’s projections, from 14.4 percent of GDP in 2020 to 3.1 percent of GDP in 2030. In CBO’s projections, federal debt rises over most of the 2020–2030 period. However, net outlays for interest decline from 1.6 percent of GDP in 2020 to 1.1 percent in 2024 and 2025 as interest rates, which have fallen in recent months, remain low. Interest rates are projected to rise over time as the economy expands. Because federal debt remains high, net outlays for interest rise to 2.2 percent of GDP in 2030.

Deficits From 2030 to 2050. In the second and third decades of CBO’s projection period, deficits grow from 5.3 percent of GDP in 2030 to 9.0 percent by 2040 and 12.6 percent by 2050. Over that 20-year period, deficits average 9.0 percent of GDP, which is much higher than their 50-year average of 3.0 percent of GDP.

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